Cost of living fostering fear of running out in retirement: Report

Challenger’s second annual Retirement Happiness Index report has found that around three-quarters of pre-retirees (76 per cent) and retirees (72 per cent) are feeling less confident about their retirement savings lasting due to the cost of living, up from 70 per cent last year.

Concerns about the longevity of their funds are particularly apparent among women with a third (34 per cent) stating they are extremely or very worried about this, compared with one in five (20 per cent) men.

Unadvised Australians are similarly concerned about outliving their retirement savings (35 per cent) compared with advised Australians (19 per cent).

In an effort to resolve this, the report suggested that providing access to guidance and simple education could be the key to boosting confidence and happiness in retirement, with three in four (74 per cent) Australians aged 60 or above believing that better financial education would improve their happiness.

However, the report revealed that half (51 per cent) of the over 60 demographic say they don’t have the resources to plan for retirement and one in five, or around 1.2 million retirees, don’t know where to start.

Looking at what is making retirees happy, activities and hobbies scored the highest on the happiness index with 80 out of 100, followed by mental health (75), having a purpose (72) and social connections (72).

Though, notably, retirement priorities were slightly different, with the top three including good physical health, having enough money to enjoy retirement, and good mental health.

Other key factors also emerged with a happiness score of 74 for advised Australians compared with 64 for non-advised, and home owners coming in at 72 compared with 61 for non-home owners.

Overall, Australians over 60 had a retirement happiness score of 69, just slightly down from 70 in 2024.

Mandy Mannix, Challenger’s chief executive, customer, said it is the things beyond their finances that build happiness in retirement, shining a light on the importance of retirees feeling they can engage in activities that add value to their lives.

“Ask a happy retiree what brings them joy, and they won’t just talk about their super balance. They’ll talk about the coffee catch-ups, the morning walks, and the holidays they have planned to visit family or see the world,” Mannix said.

“The little things make a big difference – which is why activities and purpose are so important.”

Among so much uncertainty, 85 per cent of pre-retirees and 78 per cent of Australians indicated they would be happier if they had guaranteed income for life, a 5 per cent and 6 per cent increase from 2024, respectively.

Mannix explained that the lack of financial confidence around retirement has led some to hold back on their spending, regardless of whether or not they need to.

“That’s led to a chronic underspending problem in retirement, with many Australians living more cautiously than they need to,” she said.

“Retirees go from a steady pay cheque to a lump sum, and that sudden shift makes it hard to budget with confidence. That’s why a guaranteed, regular income for life is so powerful – it replaces that pay cheque, can keep up with inflation, and gives retirees the freedom to actually live their best life in retirement.”

Mannix added: “Retirement confidence isn’t just peace of mind – it’s quality of life. When people feel financially secure, they spend, plan, and live without that worry. That’s why guaranteed regular income matters, and why Challenger is committed to helping retirees feel secure for a better future.”